With Fourth-Quarter Sales Down 5.2%, Discounter Desperate to Shed Preconceptions About Its Apparel

Coming off a 4.7% same-store-sales decline last year attributed in part to soft apparel sales, the home of the blue-light special is trying to get consumers to equate it with style via a new apparel campaign set to break March 9.

Wckd, which was launched online, targets a younger demographic and is already selling out in some locations.

Its "Style Showoff Contest" will pit Kmart customers against each other in a competition that judges personal style. The hope is that new and former customers will be surprised, and inspired to shop, by the looks these fashionistas pull together.

"We were talking about ways to dramatize what a great deal Kmart is," said Bill Stewart, Kmart's chief marketing officer, who is an alum of Levi's and Dockers. "A lot of people have preconceived ideas about what they'll find at our stores. ... It's all around getting out the word that if you think you know Kmart, you probably don't, unless you've been in in the last week."

Sprucing up wardbrobe
Jettisoning consumers' notions will be critical, given the financial woes of Kmart and its parent company, Sears Holdings. Last week, Sears Holdings said sales at Kmart stores open at least a year declined 5.2% in the fourth quarter and 4.7% during fiscal 2007. Apparel was cited as an area of particular weakness.

That's a marked departure from the relatively stable, if unextraordinary, results of years past. In 2006, same-store sales at Kmart were down 0.6% on top of a 1.2% decline in 2005. (For comparison, Sears posted a 4% decline in same-stores sales in 2007 and a 6.1% decline in 2006.)

Christine Augustine, senior retail analyst at Bear Stearns, says the timing of the apparel push could be apropos. "We consistently hear that when there's newness [in apparel], consumers will buy. ... The challenge for Kmart is going to be that they don't have the natural traffic to the store that their competitors like Wal-Mart and Target do," she said.

She added that in a tough economy, "sometimes competitors get conservative, and they're nervous, and they don't want to spend [on advertising]. If you can spend in a smart way, you can pick up share."

'Fashion ambassador'
Four women have already been chosen for the campaign in blind casting calls and have shot a TV spot and print ads, which will launch the search for Kmart's "fashion ambassador." Footage from the casting calls, in which the women react to learning the clothes they have been trying on are from Kmart, also could factor into the campaign. The women guessed the clothes were from retailers including Barneys New York, Forever 21, H&M and Banana Republic, Mr. Stewart said.

The strategy is also to put Kmart clothing on real customers. Customer feedback has said that skinny models and seamstresses can make anything look good. "I've done a lot of apparel advertising in my life, and they're right," Mr. Stewart said. "By letting our own customers tell the story of what's in the store, we have tremendous credibility and tremendous viral effect as well."

Ms. Augustine said a campaign that gets consumers talking could be a boon for the retailer. "Probably there's a whole generation of consumers that have no idea what Kmart is like. ... They maybe haven't even ventured into Kmart," she said.

The winner will be announced May 13 and will be used in a national campaign, presumably for the fall season, although Mr. Stewart declined to comment. Kmart's agency of record, DraftFCB, is working on the push, which will include TV, print, circulars and an online component. Mr. Blue Light also will be interspersed throughout the campaign.

Mr. Stewart declined to comment on whether the new campaign would lead to an increase in advertising spending for 2008. If measured spending levels in the fourth quarter of 2007 -- which are not yet available -- match those from the fourth quarter of 2006, the retailer will have spent nearly $190 million last year, according to TNS Media Intelligence. Kmart's advertising spend jumped to $192 million in 2006 from $149 million in 2005.

Luring in women
Until now, Kmart's fashion marketing has been limited, although it has been staffing up a chic design studio in New York's SoHo neighborhood with hundreds of designers. A campaign four years ago featured stars from the WB's new shows. And last summer, Mr. Blue Light hosted a runway show in one TV spot. Now execs are banking on the new apparel campaign to benefit Kmart across all categories. (Kmart still carries the Martha Stewart Everyday brand.) "The perception of apparel helps to color women's overall opinion of a retailer," Mr. Stewart said. "I think this will go a long way toward bringing all women to Kmart."
Bill Stewart, Kmart's chief marketing officer
The campaign is also likely to publicize the spring launch of three new apparel lines, although there are no guarantees, as the contestants are not limited to certain brands. The lines, Wckd, Piper & Blue and Limon & Sal, which all target a younger demographic, are already selling out in some locations, Mr. Stewart said. That's in addition to Kmart's Route 66, Jaclyn Smith and Joe Boxer lines.

There are also separate marketing plans for Wckd and Piper & Blue, both of which launched online with dedicated microsites created by Chicago-based WhittmanHart. Mr. Stewart said this is the first time Kmart has ever launched a brand online. "These brands are targeting fairly young consumers, so most of the effort there is online," he said. "We're doing a lot of work around [interactive media], and [we're] trying to do something beyond the typical banner ads."

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Natalie Zmuda

Natalie Zmuda oversees the CMO Strategy section and is responsible for identifying and analyzing the latest trends impacting chief marketers. Natalie also covers the retail and non-alcoholic beverage categories. She joined Advertising Age in 2008, following five years covering the retail and fashion industries for Conde Nast Publications.